Spring Market=More Houses?

[Anonymous]

Anonymous wrote:The jobs comment is spot on. People generally "move" for 4 reasons: (1) to adjust housing consumption, (2) to get a new job, (3) to retire or (4) they die (the final move). When there are no jobs elsewhere, (2) dries up. When seniors aren't comfortable with their 401k balances, (3) dries up. Because there are fewer type-(2) and type-(3) moves, there is less inventory, so moving to getting a bigger/smaller home becomes less prevalent. We then end up with a housing market that is entirely driven by the death of the elderly. Virtually every home in our neighborhood that has gone up for sale in the past two years has been an estate sale. QE arguably made things even worse in places like DC because of the interest rate lock-in that could jam up the housing market for the next decade. I suspect that in terms of volume, things are not going to be back to normal for a very long time.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Besides people not wanting to give up their low interest rates, they also can't sell even if they wanted to because there is no house to move to unless they are moving out of the area or way out to the burbs. The entire market is just locked up.

I think this is accurate in a lot of cases. Every house we've seriously pursued since we've been looking has been owned by an older couple with grown children who is retiring out of the area. However, we've looked at a lot of houses owned by younger families, too, so it's not universally true. I don't know where those families planned to go, though.

What's going to break this self-reinforcing cycle?

Job mobility and growth in the rest of the country outside the bubble areas of DC/SF/LA/NYC...

There used to be booming economies in the sunbelt, but now they have nothing. Rust belt is barely hanging on. Texas is not doing too bad but can't absorb everyone.

It's really a jobs problem, which is why Yellen will fix it.

Also, people can't retired and move to Florida b/c their 'conservative' investments are earning 0%; retirees are freaked out by stock market roller coaster, so can't (and shouldn't) take on riskier assets, so they really can't retire fully either. Yellen will fix this too: QE winds down 2015, 6 months later rates rise. Boom retirees now have a little cash flow and can buy that condo in Boca AND have money for food/med.

Think about, buyers will have to see massive price drops to make up for losing their low rates, and if prices drop, they cant sell.

So basically the only recourse will come when Baby Boomers are forced to move to retirement homes. The oldest boomers are now 68; retirement homes come into picture in your 80s. So we have a good 15 yrs before market kind of normal again,

[Anonymous]

Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

[Anonymous]

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

BS. First off this would show up in sold record which is still way down.

And if RE is becoming an OTC market, I would think we would all agree that things are very very broken.

Maybe this applies in rarefied thinly traded 4M+ markets? Some logic there I suppose.

[Anonymous]

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

No, that's not it, though I'm sure there are a few examples to the contrary.

It's simply economics. Demand is greater than supply. This causes prices to rise.

There are several reasons why demand is outstripping supply in DC, and they've mostly been mentioned already: demand is high because there is serious job and income growth in this region, especially when viewed relative to other regions; supply is low because traffic makes distance extremely relevant and there are immutable constraints on the amount of houses close-in; supply is low because the rate lock-in effect makes the prospect of moving to another home less attractive; supply is low because retirement accounts took a huge hit and caused a delay in retirement (I'm not sure if this is true; it's an empirical question).

So, we have demand>supply. Looking at the reasons stated above, which of these do you expect to change going-forward? The cessation of sustained job and income growth in the region? No. Traffic suffocating homes with longer commutes? Doubtful, though self-driving cars may change this landscape (of course, not within a decade). Interest rates reversing so that it's more attractive to move? No chance, period. Retirement accounts recovering? Yeah, that should happen, but the effect won't be large. (Again, I question whether this is actually relevant in DC at all; I honestly don't have a clue.)

All-in-all, I foresee little reason to think we won't have a continued disequilibrium in which demand>supply for years to come. In an odd way, I'm not more bullish on DC housing than I was before writing those lines. I'd enjoy hearing from others on this.

[Anonymous]

Last line typo:

In an odd way, I'm NOW more bullish on DC housing than I was before writing those lines. I'd enjoy hearing from others on this.

[Anonymous]

I think we're waiting on the baby boomers to retire and downsize. We're a youngish couple wanting to move into a family home. We want 4+ bedrooms and supply isn't high.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

BS. First off this would show up in sold record which is still way down.

And if RE is becoming an OTC market, I would think we would all agree that things are very very broken.

Maybe this applies in rarefied thinly traded 4M+ markets? Some logic there I suppose.

Which I said- it shows up in sold records. This happened in my market and I know of four houses in the last 60 days in sub $800k market. Real estate developer here... we do this ALL the time. If you're a little guy it makes a ton of sense. The seller gets a guaranteed buyer... and the buyer gets no competition. Risk is involved- but risk is always involved.

[Anonymous]

It's also a matter of the continued rise in prices and not just that owners have locked into low rates, especially if you value living close-in.

We'd love to move to another house still in close-in DMV but prices have skyrocketed since we purchased our house and even with low rates frankly we can't afford to upgrade and still stay in the areas we'd want to live. As a result, even though I'm more than ready to move, there is no where for us to go since moving to Ashburn isn't an option we'd consider.

A second piece, the longer we live in our houses the closer we are to paying them off. We have only 8yrs left on our 15yr mortgage. To start all over with a 30yr mortgage at a higher interest rate, even if we can afford the monthly payment, seems daunting since we are less than 30yrs from retirement age. Even though we don't love our house, financially it doesn't make sense for us to move.

[Anonymous]

Example:
I live in Market A. I know what all of my neighbors paid for their houses and what they need to make profit or potentially even break even.
I want to move to Market B. I watch from Redfin/Zillow. I watch what has sold for approximately one year. I know generally the street and house type I want to be in. I may even contact the last listing agent for a similar house in the neighborhood that sold. I wait and my realtor tells me they have a home about to go to market in two weeks. They already have a buyer for my home.

Real example. Not even in Bethesda/Arlington markets.

[Anonymous]

The issue is that unless you bought in an area that was extremely undervalued for a long time and has experienced rapid appreciation you are stuck.

Example you bought in Pimmit Hills or Petworth and experienced a 30-40% increase over the last few years and want to move to McLean, Arlington or NW which experienced a 10-15% increase. You might be able to use the equity to get you into those target areas.

Unless you experienced a life event which increased your income you don't have that much mobility within the same area to trade up to a bigger house. In fact you may be more inclined to stay if you locked in a really good interest rate.

[Anonymous]

Anonymous wrote:The issue is that unless you bought in an area that was extremely undervalued for a long time and has experienced rapid appreciation you are stuck.

Example you bought in Pimmit Hills or Petworth and experienced a 30-40% increase over the last few years and want to move to McLean, Arlington or NW which experienced a 10-15% increase. You might be able to use the equity to get you into those target areas.

Unless you experienced a life event which increased your income you don't have that much mobility within the same area to trade up to a bigger house. In fact you may be more inclined to stay if you locked in a really good interest rate.

yes you would have to be really strategic to make a move worth while. however, there will always be people that have to move for a variety of reasons.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

BS. First off this would show up in sold record which is still way down.

And if RE is becoming an OTC market, I would think we would all agree that things are very very broken.

Maybe this applies in rarefied thinly traded 4M+ markets? Some logic there I suppose.

This happens in historic Takoma Park all.the.time. In the last year, on my street alone, 4 houses (priced from $465,000 - $1.2 million) sold to neighbors or neighbor's friends without ever going on the market.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

No, that's not it, though I'm sure there are a few examples to the contrary.

It's simply economics. Demand is greater than supply. This causes prices to rise.

There are several reasons why demand is outstripping supply in DC, and they've mostly been mentioned already: demand is high because there is serious job and income growth in this region, especially when viewed relative to other regions; supply is low because traffic makes distance extremely relevant and there are immutable constraints on the amount of houses close-in; supply is low because the rate lock-in effect makes the prospect of moving to another home less attractive; supply is low because retirement accounts took a huge hit and caused a delay in retirement (I'm not sure if this is true; it's an empirical question).

So, we have demand>supply. Looking at the reasons stated above, which of these do you expect to change going-forward? The cessation of sustained job and income growth in the region? No. Traffic suffocating homes with longer commutes? Doubtful, though self-driving cars may change this landscape (of course, not within a decade). Interest rates reversing so that it's more attractive to move? No chance, period. Retirement accounts recovering? Yeah, that should happen, but the effect won't be large. (Again, I question whether this is actually relevant in DC at all; I honestly don't have a clue.)

All-in-all, I foresee little reason to think we won't have a continued disequilibrium in which demand>supply for years to come. In an odd way, I'm not more bullish on DC housing than I was before writing those lines. I'd enjoy hearing from others on this.

People keep talking about the job market here. What jobs are growing?

1) Attorneys: DCUM is full of stories for firms folding, and warning about how there has been a shift and discouraging future lawyers (as well as oversupply from the many many law schools)

2) Lobbying: Congress is basically deadlocked and lobbying has been down since recession. http://www.marketplace.org/topics/economy/new-business-lobbying

3) Tech: DOD budget is down, what 1/2 trillion for next 10 years? So defense contractor cuts. Living social is a flame out. Maybe some big data/nimble tech analytics are flourishing, but only b/c they are cheaper and leaner than the beltway bandits and Big-5 Defense contractors from whom they are taking business.

Where is this job growth?? I do concede we don't see massive layoffs and a fairly stable job market, so hence we don't see people selling b/c they have to nor waves of foreclosure.

This is a total supply-side induced bubble. Short supply is a large part b/c people were holding out for prices to go back to bubble levels (even folks who bought decades have this delusional thought that they lost money b/c it was at one point worth $XXXX, so are waiting for prices to return that point and beyond). Prices are just at bubble levels now, but I think the run-up was so fast, folks are getting greedy and sitting on their house, because "real estate never goes down".

This locked up market will persist for a long time, and end in tears I'm afraid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Completely different viewpoint.
I think people are less reliant on MLS/Redfin/Trulia/Zillow. Instead what you're seeing is market transactions that never actually hit the market. Ie. Homeowner 1 really loves their neighborhood but just wants a larger home. They talk to neighbors. They wait. Homeowner 2 is getting divorced. Homeowner 1 makes offer. House never hits market and is sold. Only shows up as "sold" on any of the typical websites.
OR
As developers do... Potential homeowner send personal letters to homes they love in a given neighborhood. They wait. Someone responds 6 months later. They buy. Again, under radar.

No, that's not it, though I'm sure there are a few examples to the contrary.

It's simply economics. Demand is greater than supply. This causes prices to rise.

There are several reasons why demand is outstripping supply in DC, and they've mostly been mentioned already: demand is high because there is serious job and income growth in this region, especially when viewed relative to other regions; supply is low because traffic makes distance extremely relevant and there are immutable constraints on the amount of houses close-in; supply is low because the rate lock-in effect makes the prospect of moving to another home less attractive; supply is low because retirement accounts took a huge hit and caused a delay in retirement (I'm not sure if this is true; it's an empirical question).

So, we have demand>supply. Looking at the reasons stated above, which of these do you expect to change going-forward? The cessation of sustained job and income growth in the region? No. Traffic suffocating homes with longer commutes? Doubtful, though self-driving cars may change this landscape (of course, not within a decade). Interest rates reversing so that it's more attractive to move? No chance, period. Retirement accounts recovering? Yeah, that should happen, but the effect won't be large. (Again, I question whether this is actually relevant in DC at all; I honestly don't have a clue.)

All-in-all, I foresee little reason to think we won't have a continued disequilibrium in which demand>supply for years to come. In an odd way, I'm not more bullish on DC housing than I was before writing those lines. I'd enjoy hearing from others on this.

People keep talking about the job market here. What jobs are growing?

1) Attorneys: DCUM is full of stories for firms folding, and warning about how there has been a shift and discouraging future lawyers (as well as oversupply from the many many law schools)

2) Lobbying: Congress is basically deadlocked and lobbying has been down since recession. http://www.marketplace.org/topics/economy/new-business-lobbying

3) Tech: DOD budget is down, what 1/2 trillion for next 10 years? So defense contractor cuts. Living social is a flame out. Maybe some big data/nimble tech analytics are flourishing, but only b/c they are cheaper and leaner than the beltway bandits and Big-5 Defense contractors from whom they are taking business.

Where is this job growth?? I do concede we don't see massive layoffs and a fairly stable job market, so hence we don't see people selling b/c they have to nor waves of foreclosure.

This is a total supply-side induced bubble. Short supply is a large part b/c people were holding out for prices to go back to bubble levels (even folks who bought decades have this delusional thought that they lost money b/c it was at one point worth $XXXX, so are waiting for prices to return that point and beyond). Prices are just at bubble levels now, but I think the run-up was so fast, folks are getting greedy and sitting on their house, because "real estate never goes down".

This locked up market will persist for a long time, and end in tears I'm afraid.

1, 2, 3 are yesterday's news and have been resolved after the government shutdown which made both sides look bad.

[Anonymous]

I don't know what jobs are growing - all I know is that the job market here is WAY better than any other place I can think of. If you lose a job here - chances are you will find another. If you lose a job and you live in a small town somwhere you are screwed.

What do you mean "will end in tears". What do you foresee happening?